American Civility

It may be time to dust off George Orwell’s satire, Animal Farm (1945), and to heed again its lesson on abuse of power.  Though he was sympathetic to socialism, Orwell was reacting to the extremes of Stalin’s oppressive hand.  The egalitarian society where "all animals are equal, but some animals are more equal than others" reminds us of the turpitude that drove “health care reform” against the will of the people.  Washington knows better than the individual what is good for him.  

Four years later, in Nineteen Eighty-Four, Orwell defined a framework on the nature of collectivist dystopia: doublethink (contemporary example: the health care bill will reduce the deficit, even as Democrats make expensive side deals); big brother (force insurance coverage by auditing business and individual); memory hole (forget that candidate Obama promised to cut wasteful spending from the budget line by line, the national debt doesn’t matter to President Obama).

Last Saturday before the fateful health care vote, The Wall Street Journal published a 1996 article by Milton Friedman in which he quotes an Alexander Solzhenitsyn novel describing the perils of state-run health care: from treatment quotas to contentious relationships between doctors and patients.¹  Friedman traced the origins of the actual U.S. versions of these problems directly to government meddling with market mechanisms: the medical insurance tax exemption given to the corporations rather than to the individual, the expansion of Medicare and Medicaid that results in de facto price controls and rationing, and the institution of “managed” care.  Intermediaries separate the consumer from the supplier and the market cannot work freely.

The present administration’s and Congress’ aversion to market solutions to health care and other challenges is entirely consistent with a stunning avoidance of sound economics.  Obama’s immediate circle of advisors is forced into contradictions between liberal ideology and properly conducted study or foundational principles.  For example, advisor Larry Summers describes his intellectual admiration of Austrian free market economist Fredrick Hayek thusly, “What I tried to leave my students with is the view that the invisible hand is more powerful than the [un]hidden hand.  Things will happen in well-organized efforts without direction, controls, plans.  That's the consensus among economists.  That's the Hayek legacy.”²  And Council of Economic Advisors chair, Christina Romer, wrote in 2007 “tax increases are highly contractionary.”³  Both supported a deficit-busting “stimulus” with meager tax cuts and heavy government interference.

Remarkably, Obama’s programs do nothing to increase supply of products and services, almost as if Washington assumes supply is infinite and can only be regulated or taxed, rather than created and allocated by market prices and demand.  In health care reform, demand is increased but supply of insurance and treatment is managed and prices controlled.  In Orwellian newspeak, a government “insurance exchange” replaces “free market”, and interstate commerce is expressly shunned.  Capital will be taxed at a higher rate without considering the inevitability of its eventual flight to safer havens outside our country.  As our trade deficit deepens and jobs move from our shores, labor is made more costly by increased payroll taxes and regulation while Germany demonstrates that worldwide competitiveness is a function of lower labor costs and increased productivity.⁴   

All of this is ominous: as the neo-Keynesians scamper around to provide theoretical underpinnings for Obama, the Financial Times reports,⁵ “Credit Suisse produced a provocative research report pointing out that the country whose debt profile most resembles that of Greece is - hold your breath - the U.S.” 

Before we meet the fate of Greece, then, Obama’s advisors might do well to revisit Hayek, author of the classic repudiation of a command economy, The Road to Serfdom, with which Keynes enthusiastically concurred.  In his Nobel Prize lecture⁶, Hayek concluded,

“The recognition of the insuperable limits to his knowledge ought indeed to teach the student of society a lesson of humility which should guard him against becoming an accomplice in men's fatal striving to control society - a striving which makes him not only a tyrant over his fellows, but which may well make him the destroyer of a civilization which no brain has designed but which has grown from the free efforts of millions of individuals.”

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[1] “A Way Out of Soviet-Style Health Care, Solzhenitsyn's prophetic warning about the depersonalization of medicine.”   The Wall Street Journal, 20 March 2010, http://online.wsj.com/article/SB10001424052748704784904575111273624979544.html?KEYWORDS=milton+friedman

[2] Lawrence Summers, quoted by Yergin, Daniel. & Stanislaw. Joseph.   The Commanding Heights: The Battle Between Government and the Marketplace that Is Remaking the Modern World. New York: Simon & Schuster. 1998

[3] Romer, Christina D., Romer, David H. “The Macroeconomic Effects Of Tax Changes: Estimates Based On A New Measure Of Fiscal Shocks”, March 2007 http://www.econ.berkeley.edu/~cromer/RomerDraft307.pdf

[4] “Europe's Stragglers Find Villain: Germany's Competitiveness.” The Wall Street Journal, 22 March 2010, http://online.wsj.com/article/SB10001424052748704534904575131980473107158.html?KEYWORDS=Europe%27s+Stragglers+Find+Villain%3A+Germany%27s+Competitiveness

[5 “Is the dollar rally about to come to a nasty end?” Financial Times, 20 March 2010, http://www.ft.com/cms/s/0/0608c18c-33c1-11df-8b99-00144feabdc0.html

[6] Hayek, Friedrich August von. “The Pretence of Knowledge.” Nobel Prize lecture, 11 December 1974, http://nobelprize.org/nobel_prizes/economics/laureates/1974/hayek-lecture.html